Valuing Event Planning Businesses
An event planning business is the backbone of nearly every event we attend. Operating such a business can be very profitable with the average operating margin being 20.0%. As of November 2017, there are approximately 122,611 event planning businesses in the United States. The number of event planners is expected to increase due to low barriers to entry. As such, competition has been one of the primary drivers for the slowdown in projected annualized growth from 2017 to 2022 of 1.3%. Over the previous five years to 2017, revenue increased at an annualized rate of 3.9%.
The slowdown in projected revenue is creating an environment where event planners are looking to acquire businesses with established brands and relationships. If you currently own an event planning business, consider the possibility of selling. The first step to selling your business is obtaining a business valuation.
Over the past five years, I have provided business valuations for several event-planning businesses across the country. To give you an idea of each of those engagements, I will list out some of the key factors used in valuing an event planning business. Keep in mind that the factors listed below are only a guide.
Market Multiples for Event Planning
- 32.0% – 55.0% of annual sales
- 2.0x – 2.7x Sellers Discretionary Earnings
- 1.5x – 2.5x EBITDA
** Disclaimer: These multiples are for educational purposes only. Multiples are based on companies with revenues between $1-$5 million. As such, the information provided does not constitute valuation advice and should not be acted as such. These multiples do not represent the valuation opinion of Peak Business Valuation or any of its valuation professionals. Instead, you should seek the guidance and advice of a qualified business valuation professional with respect to any matter contained in this article.
Key Success Factors
With a clearer understanding of what your business is worth, you can begin taking steps to increase the value of your event planning business prior to a potential sale. I will touch on 3 ways in which you can increase the value of your business. There are many factors to take into consideration, but this will provide you with the basis of what your company is worth and a few ideas to increase your company’s value.
If you are searching for a more extensive valuation, schedule a free consultation. For more ideas, see Valuation Multiples for Event Planning, Value Drivers for an Event Planning Business, and How to Value an Event Planning Business.
Service Offerings
Event planning can be classified into either corporate or personal events. With the number of businesses projected to rise an annualized 1.1% over the five years to 2022 and as total employment rises over the projected period, the average sales for corporate events will increase. Corporate event fees are based on the expected number of guests served per event. More employees equate to larger parties and events.
According to IBISWorld, personal events will also continue to rise based on the waning of free time and higher household disposable income. More households are demanding event planners to assist with organizing and coordinating social events. These trends are expected to continue over the next few years.
Whether you are focused on offering personal or corporate services, widening your service offerings may lead to balanced cash flows. The average event planner finds themselves stuck with uneven cash flows during the year. By offering additional events (i.e. scavenger hunts, parties, roundtables, charity events, etc.) you can boost revenue and balance cash flows. Not only will additional events help your cash flow, but they will increase client lists and act as publicity for future events.
Below is data derived from IBISWorld. If you are interested in more industry research, feel free to schedule a free consultation.
Event Planning Products & Services:
- Corporate Social Events – 43.1%
- Weddings – 28.4%
- Birthday Parties – 15.8%
- Other 12.7%
Employee Retention
One of the difficult aspects of event planning is the ebb and flow of employees, especially in the corporate sector. Several corporations develop close relationships with their event planner. If the event planner were to leave the company, the business is at risk of losing a client as well. As such, business owners can implement an employee retention program. Incentives like bonuses, trips, percentage of profits, etc. may incentivize employees to stay with your company helping to retain key clients.
Social Media Presence
A website provides the basis of an online footprint, but a majority of new customers rely on social media to inform their decisions. Word of mouth is a great referral source, but business reviews on Yelp, Google, and Facebook report on the quality of service provided. There are several robust online review software programs, designed to help local interaction. One of the services I recommend is Podium. Podium helps your business to stand out in the local SEO search by increasing exposure to your business through reviews, webchat, and messaging. If you would like an introduction, feel free to contact me and I will introduce you.
Social media marketing is the ultimate way to build and maintain relationships with your current and future customers.
Summary
Understanding the value of your event planning business is important, regardless of any near future transactions. Even if you have not thought about selling your business, consider the future of your business, it is never too early to start. The first step in that process is a business valuation, which we can provide you with.
We at Peak Business Valuation, a business appraiser in Utah, work with a handful of event planning businesses. We are happy to address any questions that you may have. Feel free to reach out by scheduling a free consultation.
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